Holding on to debt via a credit card or several credit cards is not really a wise choice because of the sky-high interest rates, not to mention that trying to keep track of payments can be quite a chore if you have a few cards. Credit card debt consolidation by transferring your credit card debts to a home equity loans means that you’ll have fewer debts to manage! Find out what the other benefits are below!
Save Money on Lower Interest Rates
This is by far, perhaps the most convincing reason on why transferring your credit card debt to a home equity loan is a great idea. Credit card interest rates can go between 19% to 28%, depending on how diligent you are when it comes to payments. In comparison, home equity loans would typically have an interest rate that is less than half as that for credit card debts. This can mean a few thousand of savings per year!
Lower Minimum Payments
Because home equity loans are interest only (for the most part), minimum payments are also significantly lower compared to credit card debts.
Home equity loans are pretty fluid in the sense that you can opt to pay just a part of your debt, just pay the minimum, or pay in full if you have extra funds. This enables you to reduce your debt quickly if the opportunity arises and also allows you to just pay what you can when you’re strapped for cash.
Reduce Debt Fast
Because the interest rates are lower and the payments are flexible, you can pay off a home equity loan faster than a credit card loan. This is also partly because more of payments are going towards paying off what you owe and not just going to a bank’s pockets.
Statistically speaking, if you are to pay the same amount to a home equity loan as compared to a credit card debt, you will only have paid 20% of your credit card debt after 5 years whereas that equates to having paid 60-80% of your home equity loan after the same span of time.
Keeping Things Simple
Fewer loans to keep track of means fewer bills and less probability of missing deadlines for payments. One of the beauties of using a home equity loan is debt consolidation.
Credit Score Improvement
When you are able to pay debts on time and keep track of all payments, your credit score is likely to improve. More so, the lower interest rates and being able to pay off the loan sooner can help turn your bad credit to good credit in a shorter span of time.
Easier to Get Than a Personal Loan
Because a home equity loan is backed by your home’s equity, lenders are more apt to grant it because they view it as an investment. This also explains the lower interest rates because home equity loans are viewed as secure investments whereas personal loans are viewed as a risk.
Better Than Another Credit Card
Transferring your current debt to another credit card is one way of reducing your average interest rate, but this will only reduce it by a few percentage points at the most. More so, credit card companies also charge a fee when you transfer your debt from one card to the next so you are not really saving any money in the end.
Want to apply for a home equity loan? Contact your trusted team of Toronto mortgage brokers today and save both time and money in paying off your credit card debt!
Interested in converting your debt to a Home Equity Loan? Give us a call today!